Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2022

Accounting Policies [Abstract]

Use of Estimates, Policy [Policy Text Block]

Use of Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue from Contract with Customer [Policy Text Block]

Revenue Recognition: Revenue consists primarily of fees generated through the electronic processing of payment transactions and related services. Revenue is recognized during the period in which the transactions are processed or when the related services are performed. The Company complies with ASC 606-10 and reports revenues at gross as a principal versus net as an agent. Although some of the Company's processing agreements vary with respect to specific credit risks, the Company has determined that for each agreement it is acting in the principal role. Revenues derived from electronic processing of credit, debit, and prepaid card transactions that are authorized and captured through third-party networks are reported as gross of amounts paid to sponsor banks as well as interchange and assessments paid to credit card associations. Merchants processing credit, debit, prepaid card, and ACH transactions may be charged for these services at a bundled rate based on a percentage of the dollar amount of each transaction and, in some instances, additional fees are charged for each transaction. Certain merchant customers may also be charged miscellaneous fees, including fees for chargebacks or returns, monthly minimums, and other miscellaneous services. Certain card distributors remit payment of fees earned 45 days after the end of the processing period. Prepaid card distributors have payment terms of 30 days following the end of the month. Sales taxes billed are reported directly as a liability to the taxing authority and are not included in revenue.  Our wholly-owned subsidiary, Usio Output Solutions, Inc., or Output Solutions, provides bill preparation, presentment and mailing services. Revenue from Output Solutions is recognized when the related services are performed for printing and delivered to the United States Postal Service, or USPS, for postage.

The following table presents the Company's revenues by source:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
ACH and complementary service revenue	$	3,242,794	$	3,733,453	$	10,985,722	$	10,813,806
Credit card revenue		6,842,065		6,509,344		20,495,984		18,791,129
Prepaid card services revenue		1,576,871		2,004,657		5,733,428		3,968,764
Output solutions revenue		4,734,030		3,573,616		13,507,655		10,942,062
Total revenue	$	16,395,760	$	15,821,070	$	50,722,789	$	44,515,761

Deferred Revenues: The Company records deferred revenues as a liability when it receives payments in advance of transferring control of promised goods or services to a customer. The advance consideration received from a customer is deferred until the Company provides the customer that product or service. The deferred revenues totaled $0 and $17,647 at September 30, 2022 and December 31, 2021, respectively.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents: Cash and cash equivalents includes cash and other money market instruments. The Company considers all highly liquid investments with an original maturity of 90 days or less to be cash equivalents.

Credit Card Origination Costs, Policy [Policy Text Block]

Settlement Processing Assets and Obligations: Settlement processing assets and obligations represent intermediary balances arising in our settlement process for merchants.

Customer Deposits [Policy Text Block]

Customer Deposits: The Company holds customer deposits primarily for postage expenses to ensure the Company is not out of pocket for amounts billed daily by the USPS. These customer deposits are carried on the Company's balance sheet with a corresponding liability.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

Merchant Reserves: The Company has merchant reserve requirements associated with Automated Clearing House, or ACH, transactions. The merchant reserve assets are carried on the Company's balance sheet with a corresponding liability. Merchant Reserves are set for each merchant and funds are collected and held as collateral to minimize contingent liabilities associated with any losses that may occur. While this cash is not restricted in its use, the Company believes that designating this cash to collateralize Merchant Reserves strengthens its standing with the Company's member sponsors and is in accordance with the guidelines set by the card networks.

Prepaid Card Load Assets, Policy [Policy Text Block]

Prepaid Card Load Assets: The Company maintains pre-funding accounts for its customers to facilitate prepaid card loads as initiated by the customer. These prepaid card load assets are carried on the Company's balance sheet with a corresponding liability.

The reconciliation of cash and cash equivalents to cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves is as follows for each period presented:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Beginning cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves:
Cash and cash equivalents	$	5,102,061	$	5,614,702	$	7,255,321	$	5,011,132
Prepaid card load assets		15,104,808		9,157,519		36,590,893		7,610,242
Customer deposits		1,471,214		1,410,607		1,364,193		1,305,296
Merchant reserves		6,815,073		8,101,153		6,381,153		8,265,555
Total	$	28,493,156	$	24,283,981	$	51,591,560	$	22,192,225
Ending cash, cash equivalents, prepaid card load assets, customer deposits and merchant reserves:
Cash and cash equivalents	$	4,613,123	$	5,939,834	$	4,613,123	$	5,939,834
Prepaid card load assets		15,318,411		15,084,868		15,318,411		15,084,868
Customer deposits		1,585,586		1,505,324		1,585,586		1,505,324
Merchant reserves		5,654,729		7,261,153		5,654,729		7,261,153
Total	$	27,171,849	$	29,791,179	$	27,171,849	$	29,791,179

Receivable [Policy Text Block]

Allowance for Estimated Losses: The Company maintains an allowance for estimated doubtful accounts receivable resulting from the inability or failure of the Company’s customers to make required payments. The Company determines the allowance for estimated doubtful accounts receivable losses based on an account-by-account review, taking into consideration such factors as the age of the outstanding balance, historical pattern of collections, and financial condition of the customer. During the nine months ended September 30, 2022 and the year ended  December 31, 2021, losses incurred by the Company due to bad debts were within its expectations. If the financial conditions of the Company’s customers were to deteriorate, resulting in an impairment of their ability to make contractual payments, additional losses may be incurred in future periods. Estimates for doubtful account losses are variable based on the volume of transactions processed and could increase or decrease accordingly. The allowance for estimated doubtful accounts was $319,000 at September 30, 2022 and December 31, 2021.

Inventory, Policy [Policy Text Block]

Inventory: Inventory is stated at the lower of cost or net realizable value. At September 30, 2022 and December 31, 2021, inventory consisted primarily of printing and paper supplies used for Output Solutions.

Internal Use Software, Policy [Policy Text Block]

Accounting for Internal Use Software: The Company capitalizes the costs associated with software being developed or obtained for internal use when both the preliminary project stage is completed, and it is probable that computer software being developed will be completed and placed-in service. Capitalized costs include only (i) external direct costs of materials and services consumed in developing or obtaining internal-use software, (ii) payroll and other related costs for employees who are directly associated with and who devote time to the internal-use software project, and (iii) interest costs incurred, when material, while developing internal-use software. The Company ceases capitalization of such costs no later than the point at which the project is substantially complete and ready for its intended purpose. During the nine months ended September 30, 2022 and September 30, 2021, the Company capitalized $438,128 and $561,177, respectively.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Valuation of Long-Lived and Intangible Assets: The Company assesses the impairment of long-lived and intangible assets at least annually, and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important, which could trigger an impairment review, include the following: significant under performance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy of the overall business; and significant negative industry trends. When management determines that the carrying value of long-lived and intangible assets may not be recoverable, impairment is measured as the excess of the assets’ carrying value over the estimated fair value. No impairment losses were recorded in 2021 or during the nine months ended September 30, 2022. Management is not aware of any impairment changes that may currently be required; however, the Company cannot predict the occurrence of events that might adversely affect the reported values in the future.

Contingent Liability Reserve Estimate, Policy [Policy Text Block]

Reserve for Processing Losses: If, due to insolvency or bankruptcy of one of the Company’s merchant customers, or for any other reason, the Company is not able to collect amounts from its credit card, ACH or prepaid customers that have been properly "charged back" by the customer, or if a prepaid cardholder incurs a negative balance, the Company must bear the credit risk for the full amount of the transaction. The Company may require cash deposits and other types of collateral from certain merchants to minimize any such risks. In addition, the Company utilizes multiple systems and procedures to manage merchant risk. ACH, prepaid and credit card merchant processing loss reserves are primarily determined by performing a historical analysis of the Company’s loss experience, considering other factors that could affect that experience in the future, such as the types of transactions processed and nature of the merchant relationship with its consumers and the Company’s relationship with the Company’s prepaid card holders. This reserve amount is subject to the risk that actual losses may be greater than the Company’s estimates. The Company has not incurred any significant processing losses to date. Estimates for processing losses are variable based on the volume of transactions processed and could increase or decrease accordingly. At September 30, 2022 and December 31, 2021, the Company’s reserve for processing losses was $722,494 and $623,494 respectively.

Legal Costs, Policy [Policy Text Block]

Legal Proceedings: The Company may be involved in legal matters arising in the ordinary course of business from time to time. While the Company believes that such matters are currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is or could become involved in litigation will not have a material adverse effect on its business, financial condition or results of operations.

New Accounting Pronouncements, Policy [Policy Text Block]

New Accounting Pronouncements: In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-13, Financial Instruments - Credit Losses (Topic 326), to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date.  To achieve this objective, the amendments in Topic 326 replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.  Topic 326 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for smaller reporting companies. The Company does not expect the adoption of the amendments in ASU 2016-13 to have a significant effect on its financial position and the results of its operations when such amendment is adopted.

Accounting standards that have been issued or proposed by the FASB, the SEC or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.